Tuesday, December 21, 2010

The FCIC "Presponse:" Did they Blow It?

Remember the guys who did not finish their term paper? I mean the four Republicans on the Financial Crisis Inquiry Commission, who issued their their "presponse" to the Commission report, i.e., a "dissent" when there was nothing to dissent from. Evidently the plan was to kidnap the narrative and make it their own, as in "it was the government wot done it"--especially Fanny and Freddie, the great bloated unloved demons of the housing market.

Am I right that they blew it, these guys? Among people who care, they've had a week of pretty much undivided attention, the upshot of which is to leave the report exposed as a shoddy piece of hackwork.

The man who seems to have drawn the task of manning the machine gun to cover the retreat is Peter J. Wallison of the American Enterprise Institute who has made kind of a career out out of seeking to discredit Fannie and Freddie. Joe Nocera of the New York Timesdoes the most thorough job of deconstructing the "presponse" (his word) and Wallison's role in it. In the heat of combat observers may forget, but it's fair to note that Nocera was actually measured in his criticism: he acknowledged that Wallison has been one of Fannie/Freddie's most insightful critics. But the idea that Fannie/Freddie created the current debacle--Nocera makes a compelling case that on this point,Wallison just goes off the rails.

Wallison might just have ignored Nocera. Or he might have set to show that Nocera was wrong. But no: he opts instead for the weakest of all responses: he's seen the documents; he knows he's right, maybe he'll show you next month. Meanwhile, you'll have to take his word for it.

But that's all so last week. Attention has already moved on ("oh, look, a puppy!"). The FCIC will issue its report. Wallison and friends will deliver their dissent (a"postsponse?"). Chances are he will even come up with some data on Fannie/Freddie that will muddy the debate, but if he has anything good, it's hard to imagine why he doesn't just turn it loose now. Meanwhile if anybody remembers this episode at all, they'll probably remember it as an occasion on which a quartet of supposed Republican grownups looked like just one more Gang that Couldn't Shoot Straight.

Postscript: One irony here is that Fannie/Freddie do have a lot to answer for: too big, too bloated, too self-serving, too much of a burden on the taxpayers. But on all the available evidence (i.e., excluding whatever is in Wallison's private dossier), the charge that they triggered the meltdown--that's a charge that simply will not wash. By all that we know so far, they came late to the party in a desperate game of catchup, driven mainly by their determination to retain market share. In short (I must have written this before) not so much a case of misguided public policy, but of a "shadow government" acting way too much like a sociopathic bank.